Some funds managed by US private equity firm Blue Owl Capital are estimated to face losses of up to 35%. Blue Owl has recently increased investments in private credit for the information technology sector. Amid concerns over private credit quality, Blue Owl Capital has suspended redemptions and is pursuing asset sales, with its stock price plunging more than 60% over 13 months.
According to Bloomberg on the 23rd (local time), hedge fund manager Boaz Weinstein proposed last week to purchase stakes in Blue Owl Capital Corp II (OBDC II), a non-traded business development company (BDC), and other Blue Owl funds at discounts of 20-35%.
Blue Owl Capital is a private equity manager specializing in private credit. It has significant exposure to AI infrastructure and technology sectors, including AI data centers. However, concerns over private credit quality and the "AI bubble debate" have cut Blue Owl Capital's stock price in half over the past year.
After the 2008 global financial crisis, tightened bank regulations created gaps in funding that private credit managers including Blue Owl Capital exploited, driving rapid market growth. Private credit—where non-bank financial institutions lend to companies—charges slightly higher rates than bank loans but gained popularity for faster execution and flexible terms. The private credit market reached $1.08 trillion (approximately 2,340 trillion won) by the end of last year. However, concerns persist that unlike banks, these lenders operate in regulatory blind spots with low transparency, making them vulnerable to crises.
Selling pressure on BDCs, which allow retail investors to participate in private credit, has accelerated since the second half of last year. BDCs are structured to provide high-interest loans to lower-rated small and mid-sized companies and return interest income as dividends. They can be traded like regular stocks, and non-traded BDCs allow quarterly redemption requests. While quarterly redemption terms pose no inherent problem, repeated requests exceeding limits create gaps between asset maturities and investors' cash recovery expectations.
These products recorded significant losses as loan interest income declined following benchmark rate cuts last year, compounded by losses from non-performing loans. According to Nikkei's analysis of SEC filings, redemptions from 15 major non-traded BDCs reached $6.38 billion (approximately 9.2 trillion won) in the fourth quarter of last year, a 5.8-fold increase year-over-year.
As the private credit market wobbles starting with Blue Owl Capital, concerns are growing about broader impact on retail investors. The Trump administration relaxed regulations in August last year to allow private funds in 401(k) retirement accounts, prompting private credit managers to target the $14 trillion market. President Trump enabled greater access to private equity, real estate, cryptocurrency, and other alternative assets in 401(k) accounts. Apollo Global Management, Blackstone, KKR, and Carlyle Group are now managing 401(k) assets through various products.
Blue Owl Capital permanently suspended OBDC II redemptions as of the 19th. The firm had previously sought in November last year to merge OBDC II with OBDC, another Blue Owl fund traded on the New York Stock Exchange, but withdrew the plan over investor loss concerns. It subsequently sold $1.4 billion in assets across three funds to cover redemptions and debt repayment.
On the day Blue Owl Capital suspended redemptions, its stock plunged up to 10%, with Ares Management, Blackstone, and Apollo Global Management also declining. According to Bloomberg, these companies have fallen as much as 30% this year.
Senator Elizabeth Warren, a Democratic member of the Senate Banking Committee, stated, "A shadowy private credit company is suddenly blocking investors from withdrawing their money," calling for stronger industry oversight and transparency. "The Trump administration needs to wake up," she added. "Stop forcing risky investments on Americans' retirement savings."
Blue Owl is currently selling one-third of OBDC II's loan assets and returning 30% of investor capital. When redemptions were available, withdrawals were limited to 5% of net asset value per quarter for requesting shareholders only. Since the redemption ban, the firm is returning six times more capital to all shareholders.